2012 (11) TMI 471 - AT - Income Tax

Personal expenses - Disallowance of Traveling, Telephone and Mobile Expenses - Held that - The assessee could not produce supporting vouchers for each and every item of expenses claimed under the head Travelling, Telephone and Mobile Expenses . The disallowance made on account of personal element involved under this head of the expenses at the rate of 10% at Rs.58,929/- could not be said to be excessive - against assessee. Disallowance of Credit card expenses & penalty for delayed payments - Held that - As assessee has not made any submissions before the CIT(A), there is no mistake in the order of the CIT(A) in confirming the disallowance - against assessee. Disallowance u/s.40(a)(ia) - Held that - As decided in Merilyn Shipping & Transports Vs. ACIT 2012 (4) TMI 290 - ITAT VISAKHAPATNAM the provision of section 40(a)(ia) are applicable only to the amount of expenditure which is payable on 31st March of every year and it cannot be effected to disallow which had been actually paid during the previous year, without deduction of TDS - thus disallowance is restricted to Rs.4,85,252/- amount payable as on 31-3-2005 and the balance disallowance is deleted - partly in favour of assessee. Addition on estimation of closing stock - CIT(A) deleted the addition - Held that - The method of accounting of the assessee was same as adopted by the assessee in the earlier period and has been accepted throughout by the department. There is no valid reason for disallowance of 50% of the purchases and the AO has not taken into consideration RA bill for the month of March, as also payment received during the month. In the facts and circumstances of the case, there being no valid reason for making the addition on account of estimation of closing stock - in favour of assessee. Disallowance on account of site expenses - CIT(A) deleted the addition - Held that - The assessee could not file site-wise break-up of the site expenses, and therefore the disallowance made at Rs.32,448/- by the AO was quite justified - against assessee. Disallowance of office expenses - Held that - There is no finding of any non-genuineness of the expense claimed under the head salary & wages . These expenses incurred under the head salary & wages by nature did not allow any personal use of the assessee, and therefore the CIT(A) was justified in restricting the disallowance to the extent of 10% of the traveling expenses and of telephone and mobile expenses claimed by the assessee - partly in favour of assessee.

Summary

Issues Involved:
1. Disallowance of expenses related to travelling, telephone, and mobile expenses.
2. Disallowance of credit card expenses and penalty for delayed payments.
3. Disallowance under Section 40(a)(ia) of the Act.
4. Estimation of closing stock.
5. Disallowance of site expenses.
6. Disallowance of conveyance, telephone, travelling, salary, and wages expenses.

Analysis:

Issue 1: Disallowance of expenses related to travelling, telephone, and mobile expenses
The assessee contested the disallowance of Rs.58,929, representing 10% of the claimed expenses, due to the lack of supporting vouchers. The tribunal upheld the disallowance, stating that without proper documentation, the disallowance was justified. The CIT(A)'s decision was confirmed, and the appeal was dismissed.

Issue 2: Disallowance of credit card expenses and penalty for delayed payments
The assessee challenged the disallowance of credit card expenses and penalty for delayed payments. The tribunal noted that since the authorized representative did not present any submissions, the disallowance was upheld. The tribunal dismissed the appeal, affirming the CIT(A)'s decision.

Issue 3: Disallowance under Section 40(a)(ia) of the Act
The dispute revolved around the disallowance of Rs.50,27,336 under Section 40(a)(ia) of the Act. The tribunal referred to a Special Bench decision and restricted the disallowance to Rs.4,85,252, which was the amount payable as of March 31, 2005. The balance disallowance was deleted, partially allowing the appeal.

Issue 4: Estimation of closing stock
The Revenue contested the deletion of an addition of Rs.24,01,268 on the estimation of closing stock. The tribunal agreed with the CIT(A)'s detailed reasoning, stating that there was no valid reason for the disallowance. The CIT(A)'s decision to delete the addition was upheld, and the appeal was dismissed.

Issue 5: Disallowance of site expenses
The Revenue challenged the deletion of a disallowance of Rs.32,448 on account of site expenses. The tribunal agreed with the Revenue, as the assessee failed to provide proper details of the site expenses. The disallowance made by the AO was deemed justified, and the appeal was allowed in favor of the Revenue.

Issue 6: Disallowance of conveyance, telephone, travelling, salary, and wages expenses
The Revenue disputed the deletion of a disallowance of Rs.74,208 on various expenses. The tribunal found no non-genuineness in the claimed expenses under "salary & wages" and upheld the CIT(A)'s decision to restrict the disallowance to 10% of certain expenses. The disallowance was confirmed, and the appeal was dismissed.

In conclusion, the tribunal partly allowed both the assessee's and the Revenue's appeals, addressing each issue based on the specific arguments and evidence presented during the proceedings.